PRISTINA, Aug 18, 2000 -- (Reuters) The United Nations launched an agency in Kosovo on Thursday to deal with up to 100,000 property disputes resulting from ethnic discrimination, wartime destruction and post-conflict evictions.

Officials said bringing order to Kosovo's chaotic post-war housing situation was central to building a lasting peace and attracting badly-needed investment to the province.

"Without the solution of this property rights topic there will be a lot of barriers for investment," said Klaus Toepfer, head of the UN's center for human settlement, Habitat, at the launch of the agency in the Kosovo capital Pristina.

The new Housing and Property Directorate is part of the U.N.-led administration which took control of Kosovo last year after a NATO bombing campaign to end repression of ethnic Albanians prompted Serb forces to withdraw.

It faces a formidable task.

The problems with Kosovo's housing sector began when Belgrade stripped the province of its autonomy within Yugoslavia in 1989 and introduced laws branded discriminatory by the United Nations.

The laws meant many members of Kosovo's ethnic Albanian majority lost their state-owned homes and made it difficult for Serbs to sell homes to ethnic Albanians, the UN says. As a result, many property transactions were conducted on an informal basis.

TENS OF THOUSANDS OF HOMES DESTROYED

After tension between Serbs and ethnic Albanians burst into open conflict in 1998, Serb forces burned and destroyed tens of thousands of ethnic Albanian homes before finally being driven out by the NATO air campaign in June last year.

Further chaos has been created since the war by ethnic Albanians occupying the homes of Serbs who were evicted by Albanian gangs or who fled to enclaves in fear of revenge attacks.

Serbs have accused the Kosovo Liberation Army, which fought against Serb rule, of being behind many of the evictions. The KLA, now officially disbanded, always insisted those behind the evictions were common criminals.

"Four people came to my door on July 12, 1999, on behalf of the KLA police and told me to leave the apartment," recalled Miodrag Stevanovic, a Serb pensioner at a center where people can register property claims in the Serb enclave of Gracanica.

"I had no other choice. I had to leave the apartment," said Stevanovic, who lived in Pristina. "All my things remained there. I left just as I am, just as you see me now."

While many people will welcome the effort to bring order to the property situation, a question mark hangs over how effective the new agency can be in enforcing its decisions and whether they will be accepted by people on the ground.

Leaders from Kosovo's ethnic groups have begun discussing a draft regulation setting out the agency's powers, Tom Koenigs, head of civil administration at the UN mission, said.

"It is difficult to come to an agreement which pleases all. But we need this instrument, as we needed the institution, and I'm quite confident that everyone will understand that," Koenigs said.